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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended............March 31, 1997.....
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............ to ..............
Commission file number ....... 0-11350
INTERNATIONAL LEASE FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 22-3059110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1999 AVENUE OF THE STARS LOS ANGELES, CALIFORNIA 90067
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code
(310) 788-1999
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No____________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1997
----- -----------------------------
COMMON STOCK, NO PAR VALUE 35,818,122
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
Part I. Financial Information: Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Income
Three Months Ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 5
Note to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Index to Exhibits 12
</TABLE>
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<S> <C> <C>
March 31, December 31,
1997 1996
----------- ------------
(Unaudited)
ASSETS
Cash, including interest bearing accounts
of $23,304 (1997) and $31,704 (1996) $ 33,126 $ 36,558
Current income taxes receivable 52,697 16,420
Notes receivable 409,123 429,146
Net investment in finance and sales-
type leases 101,812 103,629
Flight equipment under operating leases 14,950,900 13,674,996
Less accumulated depreciation 1,608,735 1,492,222
---------- ----------
13,342,165 12,182,774
---------- ----------
Deposits on flight equipment purchases 769,152 861,355
Accrued interest, other receivables
and other assets 63,685 50,895
Investments 18,418 18,099
Deferred debt issue costs-less
accumulated amortization of $42,017
(1997) and $43,537 (1996) 26,658 26,720
----------- -----------
$14,816,836 $13,725,596
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued interest and other payables $ 249,719 $ 219,111
Debt financing, net of deferred debt
discount of $22,915 (1997) and $22,749
(1996) 9,666,151 8,798,388
Capital lease obligations 979,596 995,872
Security & other deposits on flight
equipment 699,252 611,272
Rentals received in advance 87,029 77,107
Deferred income taxes 873,195 809,294
SHAREHOLDERS' EQUITY
Preferred stock--no par value; 20,000,000
authorized shares
Market Auction Preferred Stock, $100,000 per
share liquidation value; Series A,B,C,D,E
F,G and H (1997 and 1996) each having 500
shares issued and outstanding 400,000 400,000
Common stock--no par value; 100,000,000
authorized shares, 35,818,122 (1997
and 1996) issued and outstanding 3,582 3,582
Additional paid-in capital 579,955 579,955
Retained earnings 1,278,357 1,231,015
----------- ----------
2,261,894 2,214,552
----------- -----------
$14,816,836 $13,725,596
=========== ===========
</TABLE>
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Unaudited)
REVENUES:
Rentals of flight equipment $398,458 $337,174
Flight equipment marketing 5,756 23,164
Interest and other 11,610 10,873
-------- --------
415,824 371,211
-------- --------
EXPENSES:
Interest 147,437 135,090
Depreciation 128,036 112,903
Rent expense 21,971 10,514
Provision for overhaul 21,856 19,276
Selling, general & administrative 10,553 9,978
-------- --------
329,853 287,761
-------- --------
INCOME BEFORE INCOME TAXES 85,971 83,450
Provision for income taxes 30,543 30,546
-------- --------
NET INCOME $ 55,428 $ 52,904
======== ========
</TABLE>
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Unaudited)
OPERATING ACTIVITIES:
Net Income $ 55,428 $ 52,904
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation of flight equipment 128,036 112,903
Deferred income taxes 63,901 50,460
Amortization of deferred debt
issue costs 2,066 2,259
Gain on sale of flight equipment
included in amount financed (310)
Increase in notes receivable (13,529)
Equity in net income of affiliates (319) (238)
Changes in operating assets and liabilities:
Increase in accrued interest,
other receivables and other assets (12,791) (605)
Increase in current income taxes receivable (36,277) (22,078)
Increase in accrued interest and
other payables 30,608 21,887
Increase in rentals received in advance 9,922 190
---------- ---------
Net cash provided by operating activities 240,574 203,843
---------- ---------
INVESTING ACTIVITIES:
Acquisition of flight equipment
for operating leases (1,324,069) (813,544)
(Increase) decrease in deposits and
progress payments 92,203 (64,503)
Proceeds from disposal of flight
equipment-net of gain 36,642 131,162
Collections on notes receivable 20,023 15,977
Collections on finance and sales-type leases 1,817 1,250
----------- ----------
Net cash used in investing activities (1,173,384) (729,658)
----------- ----------
FINANCING ACTIVITIES:
Proceeds from debt financing 2,028,466 1,282,752
Payments in reduction of debt financing (1,176,813) (856,505)
Debt issue costs (2,004) (2,204)
Change in unamortized debt discount (166) 48
Increase in customer deposits 87,980 76,603
Payment of common and preferred dividends (8,085) (14,833)
----------- ----------
Net cash provided by financing activities 929,378 485,861
----------- ----------
Decrease in cash (3,432) (39,954)
Cash at beginning of period 36,558 87,097
----------- ----------
Cash at end of period $ 33,126 $ 47,143
=========== ==========
</TABLE>
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<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Dollars in thousands)
(Unaudited)
Cash paid during the period for:
Interest (net of amount capitalized
$11,953 (1997)and $11,982 (1996)) $ 100,974 $84,494
Income taxes 2,920 2,164
</TABLE>
1996:
Notes in the amount of $1,552 were received as payment in
exchange for flight equipment sold with a book value of $1,242.
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
A. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and in accordance with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair
presentation have been included. Certain reclassifications
have been made to the 1996 condensed consolidated financial
statements to conform to the 1997 presentation. Operating
results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for
the year ended December 31, 1997. For further information,
refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K/A
for the year ended December 31, 1996.
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INTERNATIONAL LEASE FINANCE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company borrows funds for the purchase of flight equipment,
including the making of progress payments during the construction
phase, principally on an unsecured basis from various sources. The
Company's debt financing was comprised of the following at the
following dates:
<TABLE>
<S> <C> <C>
March 31, December 31,
1997 1996
--------- ------------
(Dollars in thousands)
Public term debt with single
maturities $ 3,800,000 $ 3,500,000
Public medium-term notes with
varying maturities 2,522,300 2,563,720
Capital lease obligations 979,596 995,872
----------- -----------
Total term debt 7,301,896 7,059,592
Commercial paper 3,366,766 2,757,417
Less: Deferred debt discount (22,915) (22,749)
------------- ------------
Total Debt Financing $ 10,645,747 $ 9,794,260
============ ===========
Composite interest rate 6.20% 6.23%
Percentage of total debt at fixed rates 65.74% 68.95%
Composite interest rate on fixed rate
debt 6.60% 6.58%
Bank prime rate 8.50% 8.25%
</TABLE>
The interest on substantially all of the public debt
(exclusive of the commercial paper) is fixed for the term of the
note. The Company has committed revolving loans and lines of
credit with 44 banks aggregating $2.65 billion and uncommitted
lines of credit with three banks for varying amounts mutually
agreed to by the Company and the banks. Bank debt principally
provides for interest rates that vary according to the pricing
option then in effect and range from prime, .145% to .28% over
LIBOR or .395% over CD rates, at the Company's option. Bank
financings are subject to facility fees of up to .07% of amounts
available.
The Company has an effective shelf registration with respect
to $2.09 billion of debt securities, under which $100 million of
notes were sold through March 31, 1997. Additionally, a $500
million Medium-Term Note Program has been implemented under the
shelf registration, under which $20 million has been sold through
March 31, 1997.
The Company believes that the combination of internally
generated funds and debt financing currently available to the
Company will allow the
Company to meet its capital requirements for at least the next 12
months.
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<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS-Three months ended March 31, 1997 versus
1996.
The increase in revenues from the rentals of flight equipment
from $337.2 million in 1996 to $398.5 million in 1997, an 18%
increase, is attributable, in part, to the increase in the size
of the fleet of leased flight equipment subject to operating
leases from 298 at March 31, 1996 to 342 at March 31, 1997, a 15%
increase. The increase is also attributable to the increase in
the relative cost of the fleet from $12.7 billion in 1996 to
$15.0 billion in 1997, an 18% increase.
In addition to its leasing operations, the Company actively
engages in the marketing of flight equipment from its own
portfolio as well as on a principal and commission basis. Revenue
from such flight equipment marketing decreased from $23.2 million
in 1996 to $5.8 million in 1997 as a result of the nature of the
related flight equipment marketed. Flight equipment marketing
revenue consisted of the following number of transactions in each
period:
1997 1996
---- ----
Sales of flight equipment - -
Commissions 6 6
Disposition of leased flight equipment 3 6
Expenses as a percentage of total revenues increased to 79.3%
in the first quarter of 1997 compared to 77.5% in the first
quarter of 1996. Interest expense increased from $135.1 million
in 1996 to $147.4 million in 1997 primarily as a result of an
increase in gross debt outstanding at quarter end from $9.3
billion in 1996 to $10.7 billion at 1997 to finance aircraft
acquisitions. In addition, the Company's composite borrowing
rate fluctuated as follows:
<TABLE>
<S> <C> <C> <C>
1997 1996 Decrease
---- ---- --------
Beginning of Quarter 6.23% 6.47% (.24%)
End of Quarter 6.20% 6.31% (.11%)
----- ------ ------
Average 6.22% 6.39% (.17%)
</TABLE>
Depreciation of flight equipment increased from $112.9 million
in 1996 to $128.0 million in 1997 due to the addition of
aircraft.
Rent expense increased from $10.5 million in 1996 to $22.0
million in 1997 as a result of a sale-leaseback transaction for
seven aircraft completed in September 1996. Currently, fourteen
aircraft are subject to sale-lease back transactions.
Provision for overhauls increased from $19.3 million in 1996
to $21.9 million in 1997 due to an increase in the number of
aircraft from which the Company collects overhaul reserves and,
therefore, an increase in the total number of hours flown for
which an overhaul reserve is provided.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
12 Computation of Ratios of Earnings
27 Financial Data Schedule
b) Reports on Form 8-K:
1. Form 8-K, event date January 13, 1997 (Item 7)
2. Form 8-K, event date January 31, 1997 (Item 7)
3. Form 8-K, event date February 11, 1997 (Item 7)
4. Form 8-K, event date February 14, 1997 (Item 7)
5. Form 8-K, event date February 24, 1997 (Item 7)
6. Form 8-K, event date March 24, 1997 (Item 7)
<PAGE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
INTERNATIONAL LEASE FINANCE CORPORATION
May 2, 1997 __/S/ Leslie L. Gonda__
LESLIE L. GONDA
Chairman of the Board
May 2, 1997 __/S/ Alan H. Lund____
ALAN H. LUND
Executive Vice President
Co-Chief Operating Officer
and Chief Financial Officer
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No.
12 Computation of Ratios of Earnings
27 Financial Data Schedule
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS FOR THE THREE MONTHS ENDED
MARCH 31, 1997
AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
----- -----
(Unaudited)
Earnings:
Net Income $ 55,428 $ 52,904
Add:
Provision for income taxes 30,543 30,546
Fixed charges 172,600 153,440
Less:
Capitalized interest 11,953 11,982
---------- ---------
Earnings as adjusted (A) $ 246,618 $ 224,908
========== =========
Preferred dividend requirements $ 4,085 $ 4,383
Ratio of income before provision
for income taxes to net income 155% 158%
---------- ----------
Preferred dividend factor on pretax
basis 6,332 6,925
-------- ---------
Fixed Charges:
Interest expense 147,437 135,090
Capitalized interest 11,953 11,982
Interest factor of rents 13,210 6,368
-------- -------
Fixed charges as adjusted (B) 172,600 153,440
-------- -------
Fixed charges and preferred stock
dividends (C) $ 178,932 $ 160,365
========== =========
Ratio of earnings to fixed charges
(A) divided by (B) 1.43x 1.47x
===== =====
Ratio of earnings to fixed charges
and preferred stock dividends
(A) divided by (C) 1.38x 1.40x
===== =====
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS INCLUDED IN
THE REGISTRANT'S QUARTERLY REPORT ON FORM 10Q FOR THE
QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 33,126
<SECURITIES> 0
<RECEIVABLES> 409,123
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 14,950,900
<DEPRECIATION> 1,608,735
<TOTAL-ASSETS> 14,816,836
<CURRENT-LIABILITIES> 0
<BONDS> 9,666,151
<COMMON> 3,582
0
400,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,816,836
<SALES> 398,458
<TOTAL-REVENUES> 415,824
<CGS> 0
<TOTAL-COSTS> 182,416
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147,437
<INCOME-PRETAX> 85,971
<INCOME-TAX> 30,543
<INCOME-CONTINUING> 55,428
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,428
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
